The McKinsey Way

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1 Building The Solution

Like all things McKinsey, the Firm's problem-solving process has three major attributes. When team members meet for the first time to discuss their client's problem, they know that their solution will be

• Fact-based
• Rigidly structured
• Hypothesis-driven

In this chapter, you will learn exactly what these attributes mean and how you can apply them in your business.

Facts Are Friendly

Facts are the bricks with which you will lay a path to your solution and build pillars to support it. Don't fear the facts.

Problem solving at the Firm begins with facts. On the first day of an engagement, all members of the team comb through stacks of articles and internal research documents to gather enough facts to illuminate their piece of the problem for the first team meeting. Having drawn up an initial hypothesis for the problem, the team then races to gather the facts necessary (when put through the appropriate analyses) to support or refute it.

At the start of your time at McKinsey, gathering and analyzing facts is your raison d'etre. As one former SEM* observed:

When you strip away a lot of the high-minded language with which McKinsey dresses up its problem-solving process, it comes down to very careful, high-quality analysis of the components of the problem combined with an aggressive attitude toward fact gathering.

Why are facts so important to the way McKinsey does business? There are two reasons. First, facts compensate for lack of gut instinct (see " . . . But Every Client Is Unique" in Chapter 2). Most McKinsey-ites are generalists. They know a little about a lot of things. As they gainexperience and move through the ranks, they may come to know a lot about a lot of things. Even at this point, however, they will still know less about, say, inventory management practices for perishable foodstuffs than the folks who have been running the distribution operations of Stop & Shop for the last 10 years. Gut instinct might tell those folks the solution to an inventory management problem in 10 seconds (although they still would be wise to check the facts); McKinsey will go to the facts first.

Second, facts bridge the credibility gap. When she joins the Firm, the typical associate" (at least in the United States) will have graduated near the top of her college class, spent two or three years working for a large company, then received her MBA from a top business school. She will be in her mid- to late twenties. On her first engagement she may have to present her analysis to the CEO of a Fortune 50 company, who will not give much credence to what some newly minted, 27-year-old MBA has to say-unless she has an overwhelming weight of facts to back her up. This is just as true for a junior executive presenting a proposal to his boss.

Despite (or possibly because of) the power of facts, many businesspeople fear them. Perhaps they are afraid that if they look too closely at the facts, they-or someone above them-might not like what they see. Maybe they think that if they don't look, the nasty facts will go away-but they won't. Hiding from the facts is a prescription for failure-eventually, truth will out. You must not fear the facts. Hunt for them, use them, but don't fear them.

Feel Free To Be Mece

To structure your thinking when solving business problems (or anything, for that matter), you must be complete while avoiding confusion and overlap.

MECE (pronounced "me-see") stands for "mutually exclusive, collectively exhaustive" and it is a sine qua non of the problem-solving process at McKinsey. MECE gets pounded into every new associate's head from the moment of entering the Firm. Every document (including internal memos), every presentation, every e-mail and voice mail produced by a McKinsey-ite is supposed to be MECE. Ask any number of McKinsey alumni what they remember most .about the way the Firm solves problems and they will tell you, "MECE, MECE, MECE."

MECE structures your thinking with maximum clarity (hence minimum confusion) and maximum completeness. MECE starts at the top level of your solution-the list of issues making up the problem you have to solve. When you think you have determined the issues, take a hard look at them. Is each one a separate and distinct issue? If so, then your issue list is mutually exclusive. Does every aspect of the problem come under one (and only one) of these issues-that is, have you thought of everything? If so, then your issues are collectively exhaustive. Suppose your team is working on a study for that famous American manufacturing firm Acme Widgets. The problem you face is "We need to sell more widgets." Your team might come up with a list of the following ways to increase widget sales:

• Changing the way we sell our widgets to retail outlets.
• Improving the way we market our widgets to consumers.
• Reducing the unit cost of our widgets.

If this list looks rather generic, that's fine; we will talk about moving down a level of detail in the next section. What matters is that the list is MECE.

Suppose you add another item, say, "Reengineering our widget production process." How does that fit with the three issues you already have? This is certainly an important issue, but it isn't a fourth point alongside the others. It falls under "Reducing the unit cost," along with other subissues such as "Leveraging our distribution system" and "Improving our inventory management." Why? Because all these are ways to reduce the unit cost of widgets. Putting any (or all) of them with the other three issues on the list would cause an overlap. The items in the list would no longer be mutually exclusive. Overlap represents muddled thinking by the writer and leads to confusion for the reader.

Once you have a list in which all the items are separate and distinct (i.e., mutually exclusive), you have to check that it also includes every issue or item relevant to the problem (i.e., it is collectively exhaustive). Go back for a moment to "Reengineering our widget production process." You put this under "Reducing the unit cost." Now one of your team members says, "We should think about ways to improve widget quality through the production process."

She's right. Does this mean you should go back to having reengineering as an issue in its own right? No, but you should refine your list to include, under "Reducing unit cost," the subissue "Reengineering the production process to reduce unit cost," and, under "Improving the way we market . . . ," the subissue "Reengineering the production process to improve widget quality." Now you have something that looks like this:

• Changing the way we sell our widgets to retail outlets.
• Improving the way we market our widgets to consumers.
  • Reengineering the production process to improve widget quality.
• Reducing the unit cost of our widgets.
  • Reengineering the production process to reduce unit cost.

Suppose your team has come up with some interesting ideas that don't fit under the main issues. What then? You could ignore those points, but that wouldn't help Acme. You could make them issues in their own right, but then you would have too many issues. A good McKinsey issue list contains neither fewer than two nor more than five top-line issues (of course, three is best).

There is a solution to this dilemma-the magical category "Other Issues." If you can't figure out where to put those two or three brilliant ideas, there is always Other Issues. There is a caveat, however. Avoid using Other Issues in your top-line list-it looks out of place. It's fine lumped in among a bunch of subissues, but on the first slide of a big presentation, it sticks out. So try a little harder to fit those brilliant ideas into your top-line issues. Chances are you can. Still, if all else fails, Other Issues will help you stay MECE...